Transcript MBMK 705 Applied Marketing Research

The New Product
Development Process
Food Marketing Economics
ApEc 4451/5451
Fall 2008
October 30, 2008
Dennis Degeneffe
Research Fellow
The Food Industry Center
Successes
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Lunchables
Pizza, Nacho Lunchables
Progresso Soup (National Expansion)
Green Giant Create-A-Meal!
Mc Chicken Sandwich
McDonald’s Biscuits
Louis Rich Carving Board
Kraft Healthy Favorites
Donrus Baseball Cards
Oscar Mayer Light Hot Dogs & Cold Cuts
Oscar Mayer Fat Free Hot Dogs & Cold Cuts
Select Slices
Oscar Mayer Deli Favorites
Gorton’s Fish Filets
Veggie Burgers
Lessons
•
•
•
•
•
•
•
•
•
•
•
•
•
Body Buddies
Protein Plus Cereal
Donut Cereal
Saluto Pizza Reintroduction
Tom’s Potato Chips
McRib Sandwich
McSteak Sandwich
Billy Bologna
International Sausage
Paul Prudhomme’s Cajun Magic Meats
Louis Kemp Sirimi
Veggie Nuggets
Progresso Pasta Favorites
Why Introduce New Products?
• The Case For Introducing New Products
– Growth
– Capacity Utilization
– Competitive Position
• The Case Against Introducing New Products
–
–
–
–
Difficulty in Identifying a Really New Idea
High Odds of Failure*
High Cost of Failure
“Cannibalization” of existing business.
• Therefore the New Product Development
Process is a Means of Infusing Creativity and
Managing Risk.
*The failure rate for new product introduction in the retail grocery industry is 70-80 percent.
New Product Development
Process
• A systematic approach that increases the odds of success.
“The Fuzzy Front End”
Opportunity
Identification
Idea
Generation
Product
Development
Positioning
Development
Concept
Development
Marketing
Plan
Development
Concept
Screening*
Test
Marketing*
*”Stage Gates”
Commercialization
Opportunity Identification
Sources of Information:
• Business tracking
– A. C. Nielsen
– IRI
• Usage Data
– NET, Menu Census
– MRI
• Trend data
– Yankelovich Monitor
– Datamonitor
• Everyday life
Datamonitor Mega-Trends
• Convenience – Quick meals
• Health – 90% of Americans feel improving health is
important
• Age Complexity – Greater spending power among
children/teens
• Gender Complexity – Blurring of traditional gender
roles
• Lifestage Complexity – Empty nesters, boomerang
children
• Individualism & Customization
• Sensory
• Comfort
• Connectivity
1994 Strategic Insights at Pillsbury
• Mom’s life is a hassle
–
–
–
–
9-5 job
No time to plan or prepare meals
Fussy kids
Off to soccer practice
• Important to get kids to eat vegetables
– Kids won’t eat vegetables
– Stress & guilt
• Opportunity – an easy one dish fully assembled
meal that the kids will eat, and adults will enjoy too.
End Game
Cross Functional New Product
Development Team
• Participation from most involved functions
of organization.
Marketing
Research
Research &
Development
Promotions
Marketing
Team
Leader
Sales
Advertising
Agency
Finance
New Product Development Process
“The Fuzzy Front End”
Opportunity
Identification
Idea
Generation
Product
Development
Positioning
Development
Concept
Development
Marketing
Plan
Development
Concept
Screening
Test
Marketing*
Commercialization
The Fuzzy Front End
• Essentially a narrowing down process
All Possibilities
Principle – The more
options you consider
the better the odds
of a winning new
product.
Viable
Business
Propositions
Idea Generation
• Most often involves a process called “Ideation”
– Participants – Cross Functional New Product
Development Team
– Generate Ideas – Diverge
• Brainstorming – 100-200 ideas
• Suspend judgment – no yes buts
• Encourage creativity - look to the fringes
– Identify Opportunity Areas - Converge
• Prioritization of ideas
• Problem solving to “Lift” ideas
• May sketch or prototype ideas
– Generate New Product Concepts
Ideation Setting
Ideas Collected
•
•
•
•
•
•
•
•
Doughnut on a stick
Microwave breakfast cereal
Self heating side dish
Bologna slices with clown face
Pizza topping on fish fillets
Vegetables in a Pez dispenser
Dipping frosting
Cracker size cold cuts and cheese
Concept Development
• Usually the task of Marketing and/or Ad Agency
• Can involve conducting “Focus Groups”
• Two objectives:
– Judge whether the concept fits the opportunity area,
and constraints
– Refine the concept / Describe the concept:
• What it is
• What benefit(s) it delivers to the user
• Key information – size, varieties, package, price
• Determining whether the concept is appealing to
consumers is not a primary objective.
Focus Group
Concept Testing
• Produce a Concept Board
• Conduct a survey
–
–
–
–
Nationally representative sample of consumers
Internet, Mail Panel, other
Show concept
Ask buying intent, uniqueness, value, etc.
• Analyze the results
– Compare scores to benchmarks, norms
– Forecast “Trial”
• If trial forecast demonstrates that enough people
would be interested in trying the product if
available, the concept qualifies for development –
It clears the first hurtle.
Example - Concept “Board”
Introducing Kraft Easy Mac
Now your children can prepare Kraft
Macaroni & Cheese themselves. New
Kraft Easy Mac is microwavable and can
be prepared in one easy step – just place
the package in the microwave for one
minute, an stir.
Kraft Easy Mac is the same great Mac &
Cheese you grew up with, but now it is in
a frozen form that makes it accessible to
anyone in your family any time.
One 8 ounce package costs $1.59
Volume Forecast from Concept
Test
• Step One – Forecast Trial
– Uses Trial Forecast Model
• Scores from previously tested concepts, and their resulting inmarket volume
• Proprietary Models
• Step Two – Performa Volume Estimation
• Profit & Loss Analysis – Can concept (if
successfully developed) meet corporate hurtles?
Volume Forecast from Concept
Test
• Plugs in trial model, and assumptions for category
purchase dynamics
Fourte Woodlock Trial Model
Forecasted Trial
Units Purchased at Trial
Trial Volume per 100 Households
15%
1.1
16.5
Forecasted Trial
First Repeat Rate
Percent HH Who Will Repeat Purchase
Units Purchased on First Repeat
First Repeat Volume per 100 Households
15%
50%
8%
1.2
9.0
Additional Repeat Occasions in Year One
Percent HH Who Will Repeat Purchase
Units Purcased on Additional Repeat Occasions
Additional Repeat Volume per 100 Households
1.5
8%
1.2
13.5
Total Year I Volume per 100 Households
39.0
U.S. Households
Year One Volume (Packages)
Year One Volume (Cases)
110M
4,290M
357,500
Input
Assumptions
based on
Category
Averages
Forecast
New Product Development Process
“The Fuzzy Front End”
Opportunity
Identification
Idea
Generation
Product
Development
Positioning
Development
Concept
Development
Marketing
Plan
Development
Concept
Screening
Test
Marketing*
Commercialization
Product Development
• Early Stages – Broad design parameters
–
–
–
–
Produce early prototypes
Show to consumers
Get reactions
Refine design
• Fine Tuning – Finalizing formulas
–
–
–
–
Vary formulations on key ingredients
Conduct product testing among consumers
Experimental designs offer most powerful learning
Optimize formulations, packages
Positioning Development
• Develop positioning
–
–
–
–
Target
Benefit(s)
Frame of Reference
Support
• Develop communications strategies
– Media strategy
– Copy strategy
• Refine copy
– Qualitative research – “Communications Check”
– Produce rough ads
• Conduct copy test
– May be another “Stage Gate”
New Product Development Process
“The Fuzzy Front End”
Opportunity
Identification
Idea
Generation
Product
Development
Positioning
Development
Concept
Development
Marketing
Plan
Development
Concept
Screening
Test
Marketing*
Commercialization
Marketing Plan
•
Starts with Positioning
–
–
–
–
•
•
•
•
Target
Benefit(s)
Frame of Reference
Support
Sales Plan – Who will sell it, where will it be sold?
Advertising Media Plan – How will we advertise it?
Promotion Plan – Consumer promotion (coupons), Trade promotion (onsale)
Production Plan – How will we make it?
– Plants
– Lines
•
Financial Plan – How do we make the profit necessary to satisfy our share
holders?
– Fixed Costs - Capital investment, overhead
– Variable Costs – Cost to produce – ingredients, packaging, distribution
– Breakeven/Targeted Return on Investment
Test Market
• Two Stages:
– Simulated Test Market
– Live Test Market
• Simulated Test Market (STM)
– Similar to Concept Test but with product
– Provide samples to consumers who are concept
interested
– Measure both trial potential, and reaction to product.
– Reaction to product is used to forecast repeat rate.
– Volume is forecasted on basis of both the trial forecast,
and the repeat forecast.
– Second hurtle
– Suppliers – BASES, ASSESSOR
Live Test Market
• To measure actual sales volume
• Two different types:
– Controlled – BehaviorScan (Eau Claire)
– Conventional – Isolated Markets, thru normal
channels.
• Track sales rate, trial, repeat.
• Compare to goals.
• Investigate gaps vs. goals.
War Stories
• Oscar Mayer Deli Select – Package blew
up in shipping to test market.
• Oscar Mayer Select Slices – Package did
not have shelf visibility in a real store.
• Green Giant Veggie Nuggets – Trial was
among the wrong consumers (seniors).
• Lunchables w/drink box – BASES estimate
was wrong, quickly went out of stock.
Commercialization
• National expansion of product.
• Can involve significant capital investment
– Brick & Mortar
– Equipment
• Can involve distribution costs
– Slotting fees other promotion
– Sales incentives – insure selling it is a priority
• Essential to “flank” product quickly – build
product into a “Platform”
– Maintain volume growth
– Prevent competitive incursion
Flanking Example - Lunchables
LunchCombinationsHistorical GrowthTrend
700
600
Breakfast
$MM
500
Hot Dogs &
Hamburgers
400
Swirls
300
Category
Tacos & Nachos
End of Year I
Lunchables
w/Dessert
200
Pizza
“Bad Week” Ad
Platform Defined
National Roll Out
100
Fun-Pak
(Drink Box)
Louis Rich
Lunch Breaks
Trial Volume Attrition
0
1989
1990
1991
1992
Lunchables w/ Spreadable
Cheese
1993
1994
1995
1996
1997
1998
OM
1999
Year EndinginMarch
Source: A. C. Nielsen
Some Key Points
• New Product Development Process is used by most
companies to reduce the risk of failure, and produce new
winning products.
• It really starts with an opportunity identification step.
• The first stages – the “Fuzzy Front End” is based on
considering a lot of alternatives.
• Business analysis occurs throughout the process –
“Stage Gates” are built in:
– At the concept test stage – to justify development costs
– At the test market stage – to justify going to market.
• The Marketing Plan includes a comprehensive set of
plans that involve Sales, Finance, Promotions, Advertising
and Production.